Mumbai: The chief financial officer (CFO) of India’s biggest engineering firm, Larsen and Toubro Ltd (L&T), Y.M. Deosthalee, spoke in an interview about the Reserve Bank of India’s (RBI) credit policy and plans his company has for the near future. Edited excerpts:
RBI has reassured that it will keep liquidity plentiful and asked banks to cut rates. What would be a typical CFO’s reaction to this?
Raising money: L&T chief financial officer YM Deosthalee. Kedar Bhat / Mint
First of all, I would like to clarify that we did not expect the rates to come down in this policy. We also did not expect rates to go up either. So, we expected a stable kind of a situation. That is what RBI has done.
However, at the same time, they have also assured ample liquidity, and that is what is required. People should be able to get affordable credit. The most important point is that the credit offtake has to go up because, today, it is around the 16% level and it has to go up to 19-20%. That is their target.
I think there is also a possibility that, over a period of time, there will be some inflationary pressures. I think one needs to guard against that. Yesterday’s (Monday’s) explanation given by RBI on inflation indicated that it will go to around 4-5% by the January-March period. At that point in time, they will have to manage this.
There is talk that you may be doing a GDR (global depository receipts) issue or looking at doing a QIP (qualified institutional placement)? Could you confirm that for us?
We have not finalized any thing. There is currently nothing that is on the horizon. Yes, we are going to the market to raise money for L&T Finance Ltd. That is a retail bond issue that we will be launching soon.
You may not be looking at doing a QIP or GDR immediately. But do you feel the need in the next three-six months to do that? Do you feel the need for capital? Do you feel that the markets are at a place where capital may be cheap, so why not raise it?
No, one has to really see what the need for capital is. I think the most important point is that it is extremely essential for a company like ours, which is in the engineering and construction business and also in concessions business, to remain liquid. There is no doubt in my mind, as you would have seen, over the last one year when several companies faced difficulties in terms of liquidity, L&T is probably one company that has not faced much of a problem basically because we are very conservative and we continuously remain liquid. That is number one.
Secondly, in the next one or two years, I do believe that there would be plenty of opportunities for a company like L&T to participate in the infrastructure development plan of the government of India, both from a contracting angle as well as from a development angle. So, if we see some signals and if the activity level picks up and if we find that some very large jobs are coming our way and if we also find that there is a lot of activity in the public-private partnership programme, we will consider. It will be my endeavour to ensure that adequate funding is available for our businesses to grow and they should not be constrained because of liquidity issues. At the moment, in the immediate future, or maybe in the next few days, we are not thinking of anything.
Any progress on nuclear power projects?
That’s a slow process. As far as nuclear power is concerned, we would like to be a major player in that. However, for nuclear power equipment to flow in, it is going to take time. Currently, we are working mainly on hydro as well as on thermal power. But in terms of traction or significant development in the nuclear power sector, I do believe it will take still some more time.